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Country X's long run potential full employment level of Real GDP is estimated to be $24,100,000. However, the current actual Real GDP in country X stands at $ 18,000,000. Additional data shows consumers in country X have a marginal propensity to save (MPS) equal to 7%. Answer the following questions based on the above information. Suppose new calculations show country X faces a recessionary Real GDP = $4,800,000, and the income multiplier is now equal to8. By how much should Autonomous consumption" (spending) increase to close the $4,800,000 recessionary gap?

Country X's long run potential full employment level of Real GDP is estimated to be $24,100,000. However, the current actual Real GDP in country X stands at $ 18,000,000. Additional data shows consumers in country X have a marginal propensity to save (MPS) equal to 7%. Answer the following questions based on the above information. Suppose new calculations show country X faces a recessionary Real GDP = $4,800,000, and the income multiplier is now equal to8. By how much should Autonomous consumption" (spending) increase to close the $4,800,000 recessionary gap?

Survey Of Economics
Survey Of Economics
10th Edition
ISBN:9781337111522
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter15: Fiscal Policy
Section: Chapter Questions
Problem 6SQ
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Country X's long run potential full employment level of Real GDP is estimated to be $24,100,000. However, the current actual Real GDP in country X stands at $ 18,000,000. Additional data shows consumers in country X have a marginal propensity to save (MPS) equal to 7%. Answer the following questions based on the above information. Suppose new calculations show country X faces a recessionary Real GDP = $4,800,000, and the income multiplier is now equal to8. By how much should Autonomous consumption" (spending) increase to close the $4,800,000 recessionary gap?
Transcribed Image Text:Country X's long run potential full employment level of Real GDP is estimated to be $24,100,000. However, the current actual Real GDP in country X stands at $ 18,000,000. Additional data shows consumers in country X have a marginal propensity to save (MPS) equal to 7%. Answer the following questions based on the above information. Suppose new calculations show country X faces a recessionary Real GDP = $4,800,000, and the income multiplier is now equal to8. By how much should Autonomous consumption" (spending) increase to close the $4,800,000 recessionary gap?
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